The South Sea Company (A) Harvard Case Solution & Analysis

In early 1720, the South Sea Company and the Bank of England were competing for the right to issue new shares and to exchange those shares for government bonds that were then in the control of the people. Two such debt conversion had been already executed by the British government with the South Sea Company.

Most individuals who had converted bonds for shares in 1711 and 1719 had seen their South Sea shares appreciate in the meantime, and the government had lowered its debt servicing costs as a result of both of these conversions. The conversion under consideration in 1720, nevertheless, would be on a much larger scale. In time, the bid war was won by the South Sea Company, and the House of Commons approved its debt conversion strategy. It was up to the House of Lords to approve or reject the deal.

PUBLICATION DATE: December 20, 2007 PRODUCT #: 708005-HCB-ENG

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